On 2nd July, the Inter-American Development Bank (IDB) published a new study that offers a diagnosis of the factors that limit productivity in the Andean region, and a road map to boost its growth. The report states that low financial development may explain, in part, the limited growth in productivity and private investment. The IDB thus recommends that governments implement credit access public policies in order to boost private investment in the region.
According to the data collected, the GDP per capita of the countries of the region does not register considerable advances since 1970. Given this scenario, the report shows that public policy strategies which focus on the development of the financial system and access to credit in the sector private, would positively impact productivity. Among the recommended policies, the regulation of preferential interest rates for SMEs and direct financing through public banks stand out.
The study argues that for credit access public policies to be effective, it is necessary to first mitigate the market failures that restrict it. The IDB thus recommends, among other measures, to strengthen the legal rights of creditors and institutions that support financial markets, to develop entities such as guarantee funds to reduce credit risk, and to promote the role of development banks in business financing through private banking.